INVESTMENTS IN MUTUAL FUNDS
INVESTMENTS IN MUTUAL FUNDS
At AXON Securities, our range of investment services naturally includes investments in Mutual Funds. Mutual Funds (MFs) are groups of assets that consist of cash and securities whose individual assets are owned indivisibly by more than one person.
The term “capital” describes the total amount of money raised by investors, while the term “fund” describes the fact that all contributors (unit-holders) to the creation of this asset share the profits and losses that may arise according to the percentage of each one’s participation in it. MFs are essentially companies whose sole activity is to invest their money in the form of a diversified portfolio.
As with other investment products, AXON Securities’ investment advisors have the necessary expertise, experience and training to help you choose the best investment for your money. Useful information and details about the Funds can be found in the following sections:
MFs may derive a monetary benefit from investing in securities in two ways:
- The securities may pay dividends or interest to the MF.
- The prices of securities on the regulated market rise.
The MF may also lose money and therefore fall in value. The purchase or sale price of units of the fund on a particular day depends on the closing price of the units of the funds, which is calculated by the management company of each fund at the end of each business day and announced to the investing public on the next business day.
There are numerous categories of MFs from various financial groups in the market. The most common categories of mutual funds are the following:
- Treasury Management MFs: they allow individuals to achieve returns similar to those achieved by professional managers investing in money market instruments (instruments with a maturity of less than one year). This is made possible by investing in time deposits, commercial paper and others, to which individuals usually do not have access. The income is automatically capitalised so that the net value of the investment is constantly increasing with minimal risk of losing the invested capital.
- Bond MFs: they invest in government bonds, bonds of international organisations and corporate bonds. These bonds are issued in different markets and currencies and for different durations, achieving risk diversification. These funds allow the capitalisation of interest (they reinvest directly in bonds the money received from the interest payments – coupons), which is not possible at the level of the individual investor with direct investments in bonds.
- Shares MFs: Allow diversification of investments between different countries, sectors and companies. A wide variety of equity funds are offered with different market characteristics and corresponding risk. The net value of the investments changes according to the value of the shares of the fund. The funds offer the option of reinvestment or dividend yield.
- Mixed MFs: they are a combination of the above.
- Domestic MFs: Include all of the above four (4) basic categories with the limitation that all investments are in Greek/domestic securities.
- Abroad International MFs: Include all of the above four (4) basic categories with the limitation that all investments are in securities traded on foreign markets or issued by international issuers.
- Traded MFs (ETFs): the units of these funds are traded on regulated markets throughout the day. Typically the structure of this category of funds follows an equity index such as the S&P 500 or Hang Seng or a market sector such as energy and technology or commodities such as gold and oil.
- Bond MFS: are mutual funds, i.e. a pool of assets consisting of cash and securities. Savers who place their money in this category of funds are essentially placing their money in bonds, bonds and other fixed income securities and therefore have the lowest investment risk.
- Commodity MFs: these are alternative investment funds. This category of funds operates in the commodities market using derivative products which have commodities or commodity indices as underlying instruments, so their performance depends on the performance of the underlying instruments.
The advantages of investing in units of MFs over the traditional way of investing in individual listed securities are:
- the professional management
- the large investment diversification in international securities and markets
- the lower volatility of unit prices compared to the volatility of the prices of the listed securities in which the Fund invests
- the possibility for small investors to invest in shares of a diversified portfolio
- its suitability for all types of customers
- the strict government legislation governing the operation of mutual funds
- full transparency
Risk assessment in Mutual Funds
The risk of a fund depends on the composition of its assets, the investment strategy followed and the manager’s ability to apply best management practices. Investing in mutual funds does not offer a guaranteed return because of the risks of the financial instruments in which it invests. This investment involves the risk of losing a significant part or all of the initial investment.
Based on the above, it is clear that the investment risk (partial or total loss of the invested capital) is high in Equity Funds due to the investment in securities (shares). Medium risk exists in the Mixed MFs, while in the Bond and Asset Management categories the investment risk is low to minimal. Investors should carefully select the funds whose shares they buy according to their investment profile.
Investment in guaranteed principal products
Investment in guaranteed initial capital products: these are products whose main feature is that they guarantee the initial investment capital either in full or in a percentage explicitly defined by the terms of the product, usually 90% or more. In case of early liquidation there is a penalty which is set out in the terms of the product, usually a small percentage of the invested capital). The performance of these investments is not guaranteed but is linked to the performance of a selected stock market instrument or combination of stock market instruments precisely defined in the terms of the product.
Risk assessment of investments in guaranteed principal products
The risk inherent in investments in guaranteed principal products is the possibility of not achieving a return and the possible loss of a small percentage of the initial investment in the event of early liquidation. In addition, there is the risk of the issuer of the guaranteed capital going bankrupt, resulting in the loss of the entire amount of the initial investment.
Investments in Investment Products and International Market Securities
Clients who are provided with order reception and transmission services have access to investment products in international markets and these transactions are executed through affiliated firms. The firm may effect market trading in securities and financial products (National securities exchanges, OTC BB, Pink Sheets, Structure Products) in the U.S. in Germany, France, Great Britain, Switzerland, Belgium, the Netherlands, Spain, Austria, the Czech Republic, Poland, Hungary, Serbia, Italy, South Africa, Spain, Austria, Serbia, Switzerland and Cyprus.
The United States capital market is made up of thousands of companies for which the information and level of risk varies significantly depending on the category in which a company falls. Through AXON Securities, the client has access to almost all regulated exchanges and OTC markets in the United States. The company is also able to provide all information and analyst estimates published to the investment community through the Bloomberg news agency.
In particular, the company provides access to the following two categories:
- National Securities Exchanges
The US regulated exchanges are licensed by the US Securities and Exchange Commission (SEC) and individual stocks are subject to its strict control.The regulated exchanges are the American Stock Exchange, Boston Stock Exchange, Chicago Board Options Exchange, Chicago Stock Exchange, International Securities Exchange, The Nasdaq Stock Market LLC, National, Stock Exchange, New York Stock Exchange, NYSE Arca, Inc., Philadelphia Stock Exchange.
- OTC Markets (Over-the-Counter Markets) The criteria for inclusion of shares in this category are more flexible than those of the above mentioned category. Stocks traded in these markets carry more risk, but perhaps also more opportunities for quick gains (or quick losses). That is, shares have, among other things, less marketability, greater price fluctuations, less information, less control, and lower prices than those traded on regulated exchanges. Intermediaries in these markets carry out transactions on shares in the form of a market maker due to their low marketability. The two main markets that contain such stocks known as “penny stocks” are the OTC Bulletin Board (OTC BB) and Pink Sheets.
Europe & Other International Markets
AXON Securities also provides the possibility through its partners to carry out purchases and sales of shares listed on the regulated stock exchanges of the following countries:
Germany, France, Great Britain, Switzerland, Belgium, Netherlands, Spain, Austria, Czech Republic, Poland, Hungary, Serbia, Italy, South Africa, Cyprus, Switzerland, Spain, Austria, Czech Republic.
In all of the above cases, the Company or its affiliated companies ensure the best possible result for the client on the basis of the total price, which represents the price of the financial instrument and the charges related to the execution, which include all costs borne by the client and directly related to the execution of the order, including execution venue fees, clearing and settlement fees and all other fees paid to third parties involved in the execution of the order.
In cases where the client transmits an order to the Company providing specific instructions for its execution, the Company follows these instructions faithfully and automatically considers that in this way it ensures the best possible result for the execution of this order.
Please note that additional information on the Best Execution Policy may be provided to the customer upon request.